Fri, April 7th, 2017
Firms must prepare for digital tax revolution, warns leading accountancy firm
BWMacfarlane are one of the leading, independent chartered accountancy practices based in Liverpool, with a history that can be traced back to 1926.
A single-office practice based on Castle Street, they provide a wide range of accountancy and business support services to organisations and individuals predominantly in the North of England.
Managing director, Peter Taaffe says: “I think the reason we’ve thrived for such a long time in such a competitive market is because we do things differently.
“We invest lots of energy into ensuring we understand peoples business - their objectives and their requirements. We don’t believe in ‘one size fits all’, we like to get under the skin and ensure our relationships with clients are personal, proactive and relevant.
“We’re also innovators – we try to keep a step ahead – we prepare our clients for changes and developments and go above and beyond to provide a completely holistic service.”
“And preparing clients for change is more a priority now than ever before,” says Peter, “as the Government’s Making Tax Digital initiative is the largest revolution in tax reporting in years.”
From April 2018 HMRC will begin its staged rollout of Making Tax Digital (MTD), which will require businesses, the self-employed and larger landlords to file tax returns online six times a year.
Under current rules, businesses and landlords only have to file once a year.
In his Budget last month, Chancellor Philip Hammond said he was delaying the change for small businesses and landlords who are under the VAT threshold of £83,000 for a year until April 2019.
Peter warns MTD is a “monster issue” that all businesses need to start preparing for now.
He is urging entrepreneurs and business owners to adopt cloud accounting software that will not only help them comply with the changes but also help them more efficiently run their businesses.
BWMacfarlane is already one of the most digital-savvy accountancy firms in the region and is leading the way in preparing clients for the change.
Peter said: “The reality is that it is looking very likely that all businesses and landlords with an income of more than £10,000 are going to be required to file online each quarter, with two post year-end returns. This is of course in addition to their normal quarterly VAT returns.
“The Inland Revenue might say well this is nothing – but it’s not the case. It is imposing a huge cultural shift and there are many businesses, particularly smaller businesses, that simply aren’t geared up for that.
“The reality now is that any business not using cloud accounting software is going to really struggle.”
Peter fears HMRC is going to use the changes to put the squeeze on small firms to increase the amount of tax it brings in. The Revenue estimates the tax gap caused by errors from small businesses amounts to £8bn a year.
“If you were really cynical you might say the revenue have identified there is a raft of businesses not paying the right amount of tax and they think that by making them file quarterly returns online will help them address that tax gap.
“And if you were really, really cynical you might say that in a year or two time they will introduce penalties for not filing on time or for filing inaccurately and those penalties will themselves be a nice little earner.
“HMRC is going to effectively get, in real time, detailed quarterly information. Firms then have to do their year-end accounts anyway.
“They may look at the year-end accounts and say ‘this guy accrued £200,000 of profit over the four quarters, how come the annual accounts only show £50,000?’.
“End of year accounts will contain adjustments such as bad debts, which would account for the different figures - but such nuances might be lost in the confusion as HMRC is suddenly deluged with lots of extra data - but they will undoubtedly get smarter in analysing that information, developing benchmarking and analytical tools to identify where to focus their investigations.”
For a number of years BWMacfarlane has been working with leading cloud accountancy software providers and have been helping clients to move from desktop software to cloud based platforms - and are now a platinum partner of QuickBooks Online.
The firm offers free demonstrations at its Castle Street headquarters and Peter says businesses must get on top of the issue - and quickly.
He added: “Demand, pressures and additional costs is going to be several thousand pounds a year minimum for all businesses - HMRC have suggested that it will cost only £280 a year on average, a figure being challenged in the House of Lords.
“We have been working very hard with our clients to demonstrate how online accounting software cannot only help them with this compliance but also help them run their businesses better in the future.
“However, even now there is still a dearth of detail around MTD and exactly how it is going to work with only 12 months to go in which to prepare.
“That’s one of the reasons we’re so keen to work with the chamber on this.
“Liverpool & Sefton Chamber of Commerce arguably have one of the largest networks in the North West – a network of those businesses who will be affected by changes in legislation.
“April 2018 may sound like a long way off, but our philosophy is to be ahead of the game. We want to take advantage of every opportunity to work with the chamber and their members to ensure our city region’s businesses are ready long before any changes are imposed.”
For more information, contact BWMacfarlane on 0151 236 1494 or email email@example.com